which statements are true regarding a traditional individual retirement account? choose three…

which statements are true regarding a traditional individual retirement account? choose three answers.\n\nemployers create them and match employee contributions.\npeople can contribute to the account until retirement age.\npeople can withdraw money penalty-free at any time.\ncontributions to the account are limited each year.\ncontributions reduce taxable income.

which statements are true regarding a traditional individual retirement account? choose three answers.\n\nemployers create them and match employee contributions.\npeople can contribute to the account until retirement age.\npeople can withdraw money penalty-free at any time.\ncontributions to the account are limited each year.\ncontributions reduce taxable income.

Answer

Brief Explanations:

A Traditional Individual Retirement Account (IRA) is a personal savings plan that offers tax advantages for retirement. Key characteristics include:

  1. Contribution Limits: The IRS sets annual limits on how much an individual can contribute to the account.
  2. Tax Deductibility: Contributions are often tax-deductible, which reduces the individual's taxable income for the year the contribution is made.
  3. Contribution Age: Individuals with earned income can contribute to the account regardless of age (following the SECURE Act of 2019), allowing contributions up to and through retirement age.
  4. Withdrawal Rules: Unlike the statement suggesting penalty-free access, withdrawals before age $59\frac{1}{2}$ typically incur a $10%$ penalty plus income tax.
  5. Individual Nature: Unlike 401(k) plans, IRAs are established by individuals, not employers, and do not feature employer matching.

Answer:

  • People can contribute to the account until retirement age.
  • Contributions to the account are limited each year.
  • Contributions reduce taxable income.